Multiclient data has been the seismic industry's savior and its nemesis. Geophysical contractors are working to fix the broken model.

Once upon a time, seismic contractors were simple service companies, shooting 2-D seismic surveys according to the specifications of their clients, handing over the field tapes and heading to the next job.
We're not talking the 1920s here - this model was still the most common way to do business as recently as the early 1990s.
But huge changes have swept the industry in the past 10 years, brought about by the increasing acceptance of 3-D seismic, vast improvements in acquisition and processing technology and ultimately by the contractors' desire to have a little more control over their destiny.
The marriage of these influences created a new market for speculative surveys, also called nonexclusive or multiclient surveys, sometimes prefunded by a few key clients, sometimes funded primarily by the contractors themselves. The contractors maintained more control over the parameters of the survey and processed the data themselves, often offering add-ons such as amplitude variation with offset (AVO) or other special derivative products. The best part of it was the win-win pricing scenario - clients got quality data at a fraction of the cost of a proprietary 3-D survey, and the contractors owned the data and could license it as many times as they wanted.
In recent years, some of the gild has begun to leave the lily. In Brazil, for instance, one block is the size of several Gulf of Mexico blocks. So for a larger investment in acquisition and processing, a seismic company has, realistically, one or two potential buyers as opposed to the 15 to 20 a block might attract in the Gulf. Terms are less clear, environmental permits are backlogged and generally speaking, the business model is completely different. But clients expect the same price.
How are they getting it? Partly through sheer desperation on the part of some of the seismic contractors. Those with expensive capital invested - crews and vessels - often will make decisions that seem to lack sound business sense simply to keep the crew and vessel working. That vessel costs money whether it's shooting seismic or tied to the dock, and experienced crew members are hard to find and therefore often retained as employees even when there's no work for them. So some companies have made the decision to keep those boats and crews working, supported, apparently, by the justification that a little money is better than no money at all.
Finally, consolidation in the client base has dealt a severe blow to the seismic contracting industry. Even in the Gulf, with its relatively large cast of potential seismic purchasers, consolidation among the majors has impacted those contractors with deepwater databases. And as the client base has shrunk, the contractors have simultaneously become more efficient, increasing the number of vessels shooting marine spec and vastly increasing the number of streamers each vessel can tow.
"There's too much (channel count)," said Carl Hutchins, president of marine surveys for Veritas DGC. "The old boat count doesn't work anymore. There's way more overcapacity than most people realize because there are more common data points per sail line.
"We can shoot quicker than we did in the past, and our client base is getting smaller. So we're moving in opposite directions."
Best of times, worst of times
Seismic contractors defend their data libraries as one of their most important assets, despite the fact that obtaining those libraries has driven the price of a square kilometer of seismic data through the floor. They're not unaware of the fact that the spec model has, in many ways, bitten the hand that's fed it.
"We've migrated from a complete term environment 10 to 15 years ago to a complete turnkey environment," said Jim White, vice president of multiclient services for WesternGeco. "Unfortunately our turnkey contracts carry a number of terms and conditions that put all the risk on us.
"So in essence we're providing a term opportunity at turnkey rates. That's a terrible situation for us to be in."
Obviously things have to change. But what changes are needed is a matter of some debate. Analysts have long chided the industry for its overcapacity problem, and many saw the merger of contracting giants Western Geophysical and Geco-Prakla as a good step in the right direction. A year after that merger, however, the impact appears to be minimal.
"I know they took some boats down, and then they brought some back out," said Mark Wilkinson, president of PGS Exploration NSA. "So it had a transient effect on overcapacity."
PGS and Veritas also plan to merge this year, so some further capacity diminishment is likely. But perhaps the number of boats is less important than how the industry chooses to use them. Discipline is a virtue that those in the industry admit they haven't always practiced.
"We have to look at the return on the investments over a specific period of time, like 4 or 5 years," White said. "If we can't get a return on our investment in that time frame, then we shouldn't be taking that risk."
White added that WesternGeco wants to regain some of the control the industry has lost during the past decade. One way to do that is to shoot more purely speculative surveys, where prefunding isn't an issue but where the company is fairly confident it can license the data multiple times. Since margins for multiclient surveys are comparatively low, White sees the spec angle as a better way for WesternGeco to manage its risks.
"Our Q-Marine technology is also a key factor in managing risk," he said. "Clients are pleased with the results they're getting." The company is using Q-Marine for multiclient and proprietary work, and White said the continued success of the industry lies in achieving a balance between the two areas.
Wilkinson also hopes to exert more control through the use of new technology. PGS has been absent from the Gulf of Mexico for some time because Wilkinson feels new spec surveys need to be more than simply a variation on a theme.
"I'm not going to come in and overshoot by turning at 45° because that will just add to the problem that exists in the Gulf," he said. He would, however, be willing to offer a new product like PGS' HD3D technology - but only if clients are willing to pay for it.
"It's a proven technology for generating higher-resolution data, and it's meeting good response from clients," he said. "With sufficient underwriting so that it makes financial sense, we will bring that technology to the Gulf of Mexico. But the days of 'If we shoot it, they will come' are over."
Jim Wicklund of Bank of America Securities is particularly bearish on the multiclient market. "People are still drilling wells, but not many are buying seismic," he said. "The only real difference you can point to is that the seismic companies and the oil companies are running dramatically faster, larger computers today than they were even 5 years ago. It seems that increase in computer horsepower is making the reprocessing of any existing data much more economic than looking at new data."
Not so, said Bert Chenin, vice president of marketing for CGG Americas. "I see just the opposite," Chenin said. "Last year was a disappointment in deep water. There were many dry holes, which are very expensive. Reprocessing is fine to a point, but if it's bad data going in, it's bad data coming out."
Chenin said that to properly image targets in deep water, acquisition parameters need to be changed. "Everything shot goes to depth, and to go to depth you need very good data," he said. "You can't have holes. You need long records, and you need long streamers. A lot of the older generations of data that were 7- or 8-second records are just too short."
When the model works
Chenin and others haven't written off the multiclient market. CGG, for instance, has two boats active in the Gulf of Mexico, and both have considerable amounts of prefunding. "Without that commitment, my management wouldn't have allowed me to have those vessels," he said. "There's a lot of scrutiny."
Fewer players and more scrutiny might enable the industry to operate its business in a more disciplined fashion. For smaller players, finding a niche seems to be the best approach. Fairfield Industries, for instance, plays primarily in the Gulf of Mexico, shoots practically nothing but multiclient data and uses its own proprietary acquisition technology to shoot in areas such as the transition zone and the shallow water that many larger contractors have abandoned as being too difficult an environment. Marc Lawrence, senior vice president and division manager of data licensing at Fairfield, feels that the multiclient market in the Gulf fits his business model perfectly.
"I can give my data acquisition manager a map and say that our goal is to fill in as much as we can until March or April," Lawrence said. "I leave the logistics to him, and I ask him not to leave an odd shape. If he hits a problem, he can move somewhere else. The beauty is we can manage the assets much more effectively."
For other companies, moving beyond the Gulf of Mexico makes more economic sense with a mixture of 2-D and 3-D. This has worked extremely well for TGS-Nopec. TGS owns very few vessels and does 2-D and 3-D multiclient work. But its primary niche is 2-D, which can be shot on a multiclient or even speculative basis in frontier areas where not much data is available because the cost is so much lower than 3-D.
TGS works with governments that might have an upcoming licensing round or for some other reason are hoping to attract foreign companies to explore off their coasts. The company has found a niche in the 2-D basin-study types of surveys and in the fact that its lack of investment in expensive capital such as vessels gives it more freedom to choose jobs that make sense economically.
"I think a lot of the 3-D that's been done in the world has been driven by client interest, but it also has to do with available resources," said Karen El-Tawil, vice president of corporate marketing services for TGS. "When there's an overabundance of 3-D vessels, there are more projects shot. We try to make sure the projects we do are profitable. There's no resource-driven spec for us."
Generally speaking, few other parts of the world short of the North Sea tend to make viable 3-D spec markets. Wilkinson said his company has been successful in Brazil, but most other companies feel contracts there are only bid as multiclient projects because seismic contractors can get permits faster than oil companies. Most areas of the world have blocks that are too large for viable multiclient work.
Fixing the model
Has the spec market outlived its usefulness? Probably not. But it's not likely to return to the halcyon days of the mid- to late 1990s, either. It's probable that a shift back to a more concentrated balance between multiclient data and proprietary work, driven by a focus on production-related seismic needs such as time-lapse and multicomponent data, will occur within the next few years.
"Changing the business model from contract to multiclient to spec doesn't increase demand, it drops price, and it doesn't change the impact of technology," Wicklund said.
"I believe there will still be opportunities for the multiclient model," White said. "Not to the extent that it was 10 years ago, but it can still be done, and if it's managed properly, it will be successful. The key is managing it properly."

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